ServiceMaster Delivers Strong Revenue Growth of 8 Percent in Second-Quarter 2019; Terminix Delivers 4 Percent Organic Growth   

  • Terminix revenue increased 10 percent year-over-year, including 4 percent organically
  • Organic growth of 2 percent in commercial pest control, best organic growth in three years
  • Terminix delivered customer retention improvement across all revenue channels
  • Full-year 2019 revenue guidance increased to between $2,045 and $2,060 million
  • Adjusted EBITDA guidance affirmed for full-year 2019

Category:

Tuesday, August 6, 2019 6:00 am CDT

Dateline:

MEMPHIS, Tenn.

Public Company Information:

NYSE:
SERV
us81761r1095
"We continue to drive strong revenue growth in all of our businesses as we execute on our value creation strategy"

MEMPHIS, Tenn.--(BUSINESS WIRE)-- ServiceMaster Global Holdings, Inc. (NYSE: SERV), a leading provider of essential services to residential and commercial customers in the termite, pest control, cleaning and restoration markets, today announced unaudited second-quarter 2019 results.

For the quarter ended June 30, 2019, the company reported a year-over-year revenue increase of 8 percent to $560 million with net income of $59 million, or $0.43 per share. Adjusted EBITDA(1) for the quarter was $131 million, versus $125 million for the same period in 2018. Adjusted net income(2) was $68 million, or $0.50 per share, versus $45 million, or $0.33 per share, for the same period in 2018. Both adjusted EBITDA and adjusted net income, in the second quarter of 2018, include $11 million of costs historically allocated to American Home Shield.

“We continue to drive strong revenue growth in all of our businesses as we execute on our value creation strategy,” said ServiceMaster Chief Executive Officer Nik Varty. “Our relentless efforts on improving customer service and focus on employee performance capabilities enabled us to deliver strong organic revenue growth at Terminix, including the best organic growth we have seen in more than three years in our commercial pest service line. Improvements in customer retention and price realization drove growth across revenue channels, which more than offset the impact of unseasonable weather conditions. ServiceMaster Brands grew revenue 2 percent in the quarter, including strong, targeted growth in commercial cleaning national accounts. We continue to build the ServiceMaster of the future by adding capabilities through our disciplined, strategic M&A program. In line with our commitment to innovation, we recently acquired a pest focused technology company, which is currently driving pilot programs with national accounts to develop electronically controlled pest solutions. We also purchased a healthcare-focused ServiceMaster Clean franchisee, providing key operational talent to drive our strategy to provide sophisticated services to the faster growth healthcare segment.”

“We continue to make meaningful progress on transforming our business in ways that will drive sustainable strong growth and long-term profitability. Our commitment to growing our commercial pest management business is starting to pay dividends and we are well positioned for continued future growth. Our transformation team is making significant progress on the previously announced clean sheet end-to-end reimagining of our customer experiences from prospect to renewal. Expected benefits will include process productivity, automated capabilities, improved employee retention, and ultimately, improved customer retention. These essential upgrades will create the workflow foundation of our new ServiceMaster digital platform built with Salesforce technology that will provide a highly differentiated customer experience and service model.”

Consolidated Performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

Six Months Ended June 30,

$ millions

 

2019

 

2018

 

B/(W)

2019

 

2018

 

B/(W)

Revenue

 

$

560

 

 

$

520

 

 

$

41

 

$

1,042

 

 

$

947

 

 

$

94

 

YoY growth

 

 

 

 

 

 

 

 

 

 

8

%

 

 

 

 

 

 

 

 

 

10.0

%

Gross Margin

 

 

257

 

 

 

248

 

 

 

9

 

 

478

 

 

 

449

 

 

 

28

 

% of revenue

 

 

45.9

%

 

 

47.7

%

 

 

(1.8)

pts

 

45.9

%

 

 

47.4

%

 

 

(1.6)

pts

SG&A

 

 

151

 

 

 

146

 

 

 

(5)

 

 

287

 

 

 

272

 

 

 

(15)

 

% of revenue

 

 

(26.9)

%

 

 

(28.1)

%

 

 

1.2

pts

 

(27.5)

%

 

 

(28.7)

%

 

 

1.1

pts

Income from Continuing Operations before Income Taxes

 

 

80

 

 

 

59

 

 

 

21

 

 

159

 

 

 

82

 

 

 

77

 

% of revenue

 

 

14.3

%

 

 

11.3

%

 

 

3.0

pts

 

15.2

%

 

 

8.6

%

 

 

6.6

pts

Net Income

 

 

59

 

 

 

96

 

 

 

(37)

 

 

129

 

 

 

136

 

 

 

(8)

 

% of revenue

 

 

10.5

%

 

 

18.5

%

 

 

(7.9)

pts

 

12.3

%

 

 

14.4

%

 

 

(2.0)

pts

Adjusted Net Income(2)

 

 

68

 

 

 

45

 

 

 

23

 

 

112

 

 

 

73

 

 

 

40

 

% of revenue

 

 

12.1

%

 

 

8.6

%

 

 

3.5

pts

 

10.8

%

 

 

7.7

%

 

 

3.1

pts

Adjusted EBITDA(1)

 

 

131

 

 

 

125

 

 

 

7

 

 

240

 

 

 

222

 

 

 

18

 

% of revenue

 

 

23.5

%

 

 

24.0

%

 

 

(0.6)

pts

 

23.0

%

 

 

23.4

%

 

 

(0.4)

pts

Net Cash Provided from Operating Activities from Continuing Operations

 

 

68

 

 

 

54

 

 

 

13

 

 

158

 

 

 

138

 

 

 

20

 

Free Cash Flow(3)

 

 

62

 

 

 

45

 

 

 

17

 

 

143

 

 

 

110

 

 

 

33

 

Segment Performance

Revenue and Adjusted EBITDA for each reportable segment and Corporate were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

Revenue

 

Adjusted EBITDA

 

Revenue

 

Adjusted EBITDA

$ millions

 

2019

 

B/(W) vs. PY

 

2019

 

B/(W) vs. PY

 

2019

 

B/(W) vs. PY

 

2019

 

B/(W) vs. PY

Terminix

 

$

495

 

$

39

 

 

$

106

 

 

$

(4)

 

 

$

914

 

$

90

 

 

$

189

 

 

$

(8)

 

YoY growth / % of revenue

 

 

 

 

 

9

%

 

 

21.4

%

 

 

(2.8)

pts

 

 

 

 

 

11.0

%

 

 

20.6

%

 

 

(3.2)

pts

ServiceMaster Brands

 

 

65

 

 

2

 

 

 

24

 

 

 

 

 

 

128

 

 

4

 

 

 

47

 

 

 

1

 

YoY growth / % of revenue

 

 

 

 

 

2

%

 

 

37.2

%

 

 

(0.2)

pts

 

 

 

 

 

3.5

%

 

 

37.0

%

 

 

(0.6)

pts

Corporate(4)

 

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

 

 

 

 

4

 

 

 

3

 

Costs historically allocated to American Home Shield

 

 

 

 

 

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

 

 

22

 

Total

 

$

560

 

$

41

 

 

$

131

 

 

$

7

 

 

$

1,042

 

$

94

 

 

$

240

 

 

$

18

 

YoY growth / % of revenue

 

 

 

 

 

8

%

 

 

23.5

%

 

 

(0.6)

pts

 

 

 

 

 

10.0

%

 

 

23.0

%

 

 

(0.4)

pts

Reconciliations of net income to adjusted net income and adjusted EBITDA, as well as a reconciliation of net cash provided from operating activities from continuing operations to free cash flow, are set forth below in this press release.

Terminix

Terminix reported 10 percent year-over-year revenue growth in the second quarter of 2019, including more than 4 percent organic growth. Pricing and customer retention gains in all revenue channels more than offset lower recurring and one-time unit sales in the period, partially due to unseasonal weather conditions. Acquisition revenue growth of 5 percent included strong year-over-year growth from the January 2019 acquisition of Assured Environments. Revenue growth for the three months ended June 30, 2019 was negatively impacted by approximately $3 million due to wet weather conditions and flooding that affected low-margin product sales and lead flow, primarily for termite completion revenue.

Adjusted EBITDA in the second quarter decreased by $4 million year-over-year, led by $6 million of investments in growth and productivity initiatives as well as, $4 million in spin related dis-synergies. These costs were partially offset by flow-through from higher acquisition and organic revenue.

ServiceMaster Brands

ServiceMaster Brands reported a $2 million, or 2 percent, year-over-year revenue increase in the second quarter of 2019. Growth in the quarter included 16 percent growth in commercial cleaning national accounts as well a 24 percent increase in insurance program revenue as the company continues to focus on adding value to franchisee partners.

Adjusted EBITDA in the second quarter was flat to prior year.

Corporate

Corporate contributed $1 million in adjusted EBITDA in the three months ended June 30, 2019, primarily related to continued favorability in claims results related to the company’s workers’ compensation, auto and general liability program.

Historically Allocated Services

The American Home Shield segment, which was separated in a tax-free transaction on October 1, 2018, is reported in discontinued operations for all periods.

The company has historically incurred the cost of certain corporate-level activities that we performed on behalf of our businesses, including American Home Shield, such as executive functions, communications, public relations, finance and accounting, tax, treasury, internal audit, human resources operations and benefits, risk management and insurance, supply management, real estate management, legal, marketing, facilities, information technology and other general corporate support services. The cost of such activities were historically allocated to our segments, including American Home Shield. Certain corporate expenses which were historically allocated to the American Home Shield segment are not permitted to be classified as discontinued operations under U.S. GAAP (“Historically Allocated Services”). Such Historically Allocated Services amounted to $11 million and $22 million for the three and six months ended June 30, 2018.

The costs of Historically Allocated Services which were not transferred to American Home Shield are borne by our remaining businesses as dis-synergies. We continue to estimate total dis-synergies to be approximately $18 million in 2019.

Share Repurchase Plan

On February 19, 2019, our Board of Directors approved a three-year extension to the company’s share repurchase plan allowing up to $150 million of repurchases through February 2022. During the three months ended June 30, 2019, the company purchased 286,335 shares at average price of $51.30 for a total of $15 million. As of June 30, 2019, there remains $134 million of capacity under the share repurchase plan.

Frontdoor Share Monetization Debt Reduction

In the six months ended June 30, 2019, we monetized 16.7 million shares of frontdoor common stock we retained after the spin-off, resulting in net proceeds of $486 million, substantially all of which was used to reduce debt. This debt reduction lowers our net leverage ratio to 2.6 times adjusted EBITDA, well within our targeted net leverage range of 2.5 to 3.0 times adjusted EBITDA.

Free Cash Flow

Free cash flow was $143 million for the six months ended June 30, 2019 compared to $110 million for the six months ended June 30, 2018. The $33 million improvement was driven primarily by lower property additions compared to prior year due to our Global Service Center relocation in 2018, and a decrease in cash interest as a result of debt reductions in 2019. For the six months ended June 30, 2019 free cash flow to adjusted EBITDA conversion was 60 percent. The company expects free cash flow to range between 55 to 60 percent of adjusted EBITDA for the full year of 2019.

Full-Year 2019 Outlook

The company has increased full-year 2019 revenue guidance to range from $2,045 million to $2,060 million, or an increase of 8 percent compared to 2018. Organic revenue growth at Terminix is expected to range from 2 to 3 percent. ServiceMaster Brands will continue to focus on driving growth in commercial cleaning national accounts and is expected to increase revenue in the mid-single digits.

The company has reaffirmed full-year 2019 adjusted EBITDA guidance between $435 million and $445 million. Increased investments in growth and productivity at Terminix reduce incremental margins to approximately 20 percent, excluding incremental spin dis-synergies of $11 million and $9 million of investments related to the Salesforce implementation.

A reconciliation of the forward-looking 2019 adjusted EBITDA outlook to net income is not being provided, as the company does not currently have sufficient data to accurately estimate the variables and individual adjustments for such reconciliation.

Second-Quarter 2019 Earnings Conference Call

The company will hold a conference call to discuss its second-quarter 2019 financial and operating results at 8 a.m. central time (9 a.m. eastern time) on Tuesday, August 6, 2019.

Participants may join this conference call by dialing 800.707.7561 (or international participants, +1.312.281.2959). Additionally, the conference call will be available via webcast. A slide presentation highlighting the company’s results will also be available. To participate via webcast and view the presentation, visit the company’s investor relations home page.

The call will be available for replay until September 5, 2019. To access the replay of this call, please call 800.633.8284 and enter reservation number 21926972 (international participants: +1.402.977.9140, reservation number 21926972). Or you can review the webcast on the company’s investor relations home page.

About ServiceMaster

ServiceMaster Global Holdings, Inc. is a leading provider of termite and pest control, cleaning and restoration services in both the residential and commercial markets, operating through an extensive service network of more than 8,000 company-owned locations and franchise and license agreements. The company’s portfolio of well-recognized brands includes AmeriSpec (home inspections), Copesan (commercial national accounts pest management), Furniture Medic (cabinet and furniture repair), Merry Maids (residential cleaning), ServiceMaster Clean (commercial cleaning), ServiceMaster Restore (restoration and reconstruction), Terminix (termite and pest control), and Terminix Commercial (commercial termite and pest control). The company is headquartered in Memphis, Tenn. Go to www.servicemaster.com for more information about ServiceMaster or follow the company at twitter.com/ServiceMaster or Facebook.com/ServiceMaster .

Information Regarding Forward-Looking Statements

This press release contains forward-looking statements and cautionary statements, including 2019 revenue, organic revenue growth, adjusted EBITDA and incremental margin outlook and projections. Forward-looking statements can be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,” “aims,” “projects,” “is optimistic,” “intends,” “plans,” “estimates,” “anticipates” or other comparable terms. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including, without limitation, the risks and uncertainties discussed in the “Risk Factors” and “Information Regarding Forward-Looking Statements” sections in the company’s reports filed with the U.S. Securities and Exchange Commission. Such risks, uncertainties and changes in circumstances include, but are not limited to: lawsuits, enforcement actions and other claims by third parties or governmental authorities; compliance with, or violation of environmental health and safety laws and regulations; weakening general economic conditions; weather conditions and seasonality; the success of our business strategies, and costs associated with restructuring initiatives. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of the market segments in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this press release. The company assumes no obligation to update the information contained herein, which speaks only as of the date hereof.

Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures. Non-GAAP measures should not be considered as an alternative to GAAP financial measures. Non-GAAP measures may not be calculated like or comparable to similarly titled measures of other companies. See non-GAAP reconciliations below in this press release for a reconciliation of these measures to the most directly comparable GAAP financial measures. adjusted EBITDA, adjusted net income, adjusted earnings per share and free cash flow are not measurements of the company’s financial performance under GAAP and should not be considered as an alternative to net income, net cash provided by operating activities from continuing operations or any other performance or liquidity measures derived in accordance with GAAP. Management uses these non-GAAP financial measures to facilitate operating performance and liquidity comparisons, as applicable, from period to period. We believe these non-GAAP financial measures are useful for investors, analysts and other interested parties as they facilitate company-to-company operating performance and liquidity comparisons, as applicable, by excluding potential differences caused by variations in capital structures, taxation, the age and book depreciation of facilities and equipment, restructuring initiatives and equity-based, long-term incentive plans.

_______________________________________________

(1) Adjusted EBITDA is defined as net income before: (gain) loss from discontinued operations, net of income taxes; provision for income taxes; interest expense; depreciation and amortization expense; acquisition-related costs; fumigation related matters; non-cash stock-based compensation expense; restructuring charges; loss on extinguishment of debt; and realized (gain) on investment in frontdoor, inc. The company’s definition of adjusted EBITDA may not be comparable to similarly titled measures of other companies.

(2) Adjusted net income is defined as net income before: amortization expense; fumigation related matters; restructuring charges; acquisition-related costs; realized (gain) on investment in frontdoor, inc.; (gain) loss from discontinued operations, net of income taxes; loss on extinguishment of debt; and the tax impact of the aforementioned adjustments and the impact of tax law change on deferred taxes. The company’s definition of adjusted net income may not be comparable to similarly titled measures of other companies. Adjusted earnings per share is calculated as adjusted net income divided by the weighted-average diluted common shares outstanding.

(3) Free cash flow is defined as net cash provided from operating activities from continuing operations less property additions, net of government grant fundings for property additions.

(4) Corporate includes the unallocated expenses of our corporate functions.

 

SERVICEMASTER GLOBAL HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Income

(In millions, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2019

 

2018

 

2019

 

2018

Revenue

 

$

560

 

$

520

 

$

1,042

 

$

947

Cost of services rendered and products sold

 

 

303

 

 

272

 

 

564

 

 

498

Selling and administrative expenses

 

 

151

 

 

146

 

 

287

 

 

272

Amortization expense

 

 

6

 

 

5

 

 

12

 

 

8

Acquisition-related costs

 

 

3

 

 

1

 

 

4

 

 

1

Fumigation related matters

 

 

(1)

 

 

 

 

 

 

Restructuring charges

 

 

3

 

 

 

 

10

 

 

12

Realized (gain) on investment in frontdoor, inc.

 

 

 

 

 

 

(40)

 

 

Interest expense

 

 

18

 

 

37

 

 

45

 

 

75

Interest and net investment income

 

 

(3)

 

 

(1)

 

 

(4)

 

 

(1)

Loss on extinguishment of debt

 

 

 

 

 

 

6

 

 

Income from Continuing Operations before Income Taxes

 

 

80

 

 

59

 

 

159

 

 

82

Provision for income taxes

 

 

21

 

 

19

 

 

30

 

 

26

Income from Continuing Operations

 

 

59

 

 

40

 

 

129

 

 

56

Gain (loss) from discontinued operations, net of income taxes

 

 

 

 

56

 

 

(1)

 

 

80

Net Income

 

$

59

 

$

96

 

$

129

 

$

136

Total Comprehensive Income

 

$

55

 

$

99

 

$

123

 

$

149

Weighted-average common shares outstanding - Basic

 

 

136.0

 

 

135.5

 

 

135.9

 

 

135.4

Weighted-average common shares outstanding - Diluted

 

 

136.5

 

 

135.8

 

 

136.4

 

 

135.7

Basic Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

0.44

 

$

0.29

 

$

0.95

 

$

0.42

Gain (loss) from discontinued operations, net of income taxes

 

 

 

 

0.42

 

 

 

 

0.59

Net Income

 

 

0.43

 

 

0.71

 

 

0.95

 

 

1.01

Diluted Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

0.43

 

$

0.29

 

$

0.95

 

$

0.42

Gain (loss) from discontinued operations, net of income taxes

 

 

 

 

0.42

 

 

 

 

0.59

Net Income

 

 

0.43

 

 

0.71

 

 

0.94

 

 

1.00

 

 

SERVICEMASTER GLOBAL HOLDINGS, INC.

Consolidated Statements of Financial Position

(In millions, except share data)

 

 

 

 

 

 

 

 

 

As of

 

As of

 

 

June 30,

 

December 31,

 

 

2019

 

2018

Assets:

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

228

 

$

224

Investment in frontdoor, inc.

 

 

 

 

445

Receivables, less allowances of $24 and $21, respectively

 

 

210

 

 

186

Inventories

 

 

41

 

 

45

Prepaid expenses and other assets

 

 

76

 

 

61

Total Current Assets

 

 

555

 

 

962

Other Assets:

 

 

 

 

 

 

Property and equipment, net

 

 

198

 

 

201

Operating lease right-of-use assets

 

 

101

 

 

Goodwill

 

 

2,038

 

 

1,956

Intangible assets, primarily trade names, service marks and trademarks, net

 

 

1,625

 

 

1,588

Restricted cash

 

 

89

 

 

89

Notes receivable

 

 

47

 

 

43

Long-term marketable securities

 

 

19

 

 

21

Deferred customer acquisition costs

 

 

92

 

 

77

Other assets

 

 

43

 

 

87

Total Assets

 

$

4,806

 

$

5,023

Liabilities and Stockholders' Equity:

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

115

 

$

89

Accrued liabilities:

 

 

 

 

 

 

Payroll and related expenses

 

 

56

 

 

60

Self-insured claims and related expenses

 

 

57

 

 

58

Accrued interest payable

 

 

15

 

 

14

Other

 

 

59

 

 

61

Deferred revenue

 

 

101

 

 

95

Current portion of lease liability

 

 

17

 

 

Current portion of long-term debt

 

 

53

 

 

49

Total Current Liabilities

 

 

473

 

 

425

Long-Term Debt

 

 

1,252

 

 

1,727

Other Long-Term Liabilities:

 

 

 

 

 

 

Deferred taxes

 

 

485

 

 

484

Other long-term obligations, primarily self-insured claims

 

 

152

 

 

182

Long-term lease liability

 

 

116

 

 

Total Other Long-Term Liabilities

 

 

752

 

 

666

Commitments and Contingencies

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

Common stock $0.01 par value (authorized 2,000,000,000 shares with 147,798,557 shares issued and 135,953,492 outstanding at June 30, 2019 and 147,209,928 shares issued and 135,687,558 outstanding at December 31, 2018)

 

 

2

 

 

2

Additional paid-in capital

 

 

2,326

 

 

2,309

Retained Earnings

 

 

285

 

 

156

Accumulated other comprehensive (loss) income

 

 

(1)

 

 

5

Less common stock held in treasury, at cost (11,845,065 shares at June 30, 2019 and 11,552,370 shares at December 31, 2018)

 

 

(283)

 

 

(267)

Total Stockholders' Equity

 

 

2,329

 

 

2,204

Total Liabilities and Stockholders' Equity

 

$

4,806

 

$

5,023

 

 

SERVICEMASTER GLOBAL HOLDINGS, INC.

Consolidated Statements of Cash Flows

(In millions)

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

June 30,

 

 

2019

 

2018

Cash and Cash Equivalents and Restricted Cash at Beginning of Period

 

$

313

 

$

563

Cash Flows from Operating Activities from Continuing Operations:

 

 

 

 

 

 

Net Income

 

 

129

 

 

136

Adjustments to reconcile net income to net cash provided from operating activities:

 

 

 

 

 

 

Loss (gain) from discontinued operations, net of income taxes

 

 

1

 

 

(80)

Depreciation expense

 

 

37

 

 

35

Amortization expense

 

 

12

 

 

8

Amortization of debt issuance costs

 

 

2

 

 

3

Amortization of lease right-of-use assets

 

 

9

 

 

Payments on fumigation related matters

 

 

(1)

 

 

Realized (gain) on investment in frontdoor, inc.

 

 

(40)

 

 

Loss on extinguishment of debt

 

 

6

 

 

Deferred income tax provision

 

 

8

 

 

10

Stock-based compensation expense

 

 

8

 

 

8

Gain on sale of marketable securities

 

 

(1)

 

 

Restructuring charges

 

 

10

 

 

12

Payments for restructuring charges

 

 

(11)

 

 

(8)

Other

 

 

(8)

 

 

(4)

Change in working capital, net of acquisitions:

 

 

 

 

 

 

Receivables

 

 

(18)

 

 

(4)

Inventories and other current assets

 

 

(12)

 

 

(25)

Accounts payable

 

 

27

 

 

25

Deferred revenue

 

 

4

 

 

6

Accrued liabilities

 

 

(7)

 

 

(6)

Accrued interest payable

 

 

1

 

 

(2)

Current income taxes

 

 

5

 

 

22

Net Cash Provided from Operating Activities from Continuing Operations

 

 

158

 

 

138

Cash Flows from Investing Activities from Continuing Operations:

 

 

 

 

 

 

Property additions

 

 

(15)

 

 

(35)

Government grant fundings for property additions

 

 

 

 

7

Sale of equipment and other assets

 

 

 

 

1

Business acquisitions, net of cash acquired

 

 

(119)

 

 

(149)

Sales and maturities of available-for-sale securities

 

 

3

 

 

Origination of notes receivable

 

 

(58)

 

 

(54)

Collections on notes receivable

 

 

68

 

 

49

Net Cash Used for Investing Activities from Continuing Operations

 

 

(121)

 

 

(182)

Cash Flows from Financing Activities from Continuing Operations:

 

 

 

 

 

 

Borrowings of debt

 

 

600

 

 

Payments of debt

 

 

(624)

 

 

(110)

Repurchase of common stock

 

 

(17)

 

 

Issuance of common stock

 

 

9

 

 

6

Net Cash Provided from (Used for) Financing Activities from Continuing Operations

 

 

(32)

 

 

(104)

Cash Flows from Discontinued Operations:

 

 

 

 

 

 

Cash (used for) provided from operating activities

 

 

(2)

 

 

141

Cash used for investing activities

 

 

 

 

(13)

Cash used for financing activities

 

 

 

 

(6)

Net Cash (Used for) Provided from Discontinued Operations

 

 

(2)

 

 

122

Cash Increase (Decrease) During the Period

 

 

3

 

 

(25)

Cash and Cash Equivalents and Restricted Cash at End of Period

 

$

316

 

$

538

The following table presents reconciliations of net income to adjusted net income.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

(In millions)

 

2019

 

2018

 

2019

 

2018

Net Income

 

$

59

 

$

96

 

$

129

 

$

136

Amortization expense

 

 

6

 

 

5

 

 

12

 

 

8

Acquisition-related costs

 

 

3

 

 

1

 

 

4

 

 

1

Fumigation related matters

 

 

(1)

 

 

 

 

 

 

Restructuring charges

 

 

3

 

 

 

 

10

 

 

12

Realized (gain) on investment in frontdoor, inc.

 

 

 

 

 

 

(40)

 

 

(Gain) loss from discontinued operations, net of income taxes

 

 

 

 

(56)

 

 

1

 

 

(80)

Loss on extinguishment of debt

 

 

 

 

 

 

6

 

 

Tax impact of adjustments

 

 

(2)

 

 

(2)

 

 

(8)

 

 

(6)

Adjusted Net Income

 

$

68

 

$

45

 

$

112

 

$

73

Weighted-average diluted common shares outstanding

 

 

136.5

 

 

135.8

 

 

136.4

 

 

135.7

Adjusted earnings per share

 

$

0.50

 

$

0.33

 

$

0.82

 

$

0.54

The following table presents reconciliations of net cash provided from operating activities from continuing operations to free cash flow.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

June 30,

(In millions)

 

2019

 

2018

Net Cash Provided from Operating Activities from Continuing Operations

 

$

68

 

$

54

Property additions and Government grant fundings for property additions

 

 

(6)

 

 

(9)

Free Cash Flow

 

$

62

 

$

45

 

 

 

 

 

 

 

The following table presents reconciliations of net income to Adjusted EBITDA.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

 

2019

 

2018

 

2019

 

2018

Net income

 

$

59

 

$

96

 

$

129

 

$

136

Depreciation and amortization expense

 

 

24

 

 

23

 

 

49

 

 

44

Acquisition-related costs

 

 

3

 

 

1

 

 

4

 

 

1

Fumigation related matters

 

 

(1)

 

 

 

 

 

 

Non-cash stock-based compensation expense

 

 

4

 

 

4

 

 

8

 

 

8

Restructuring charges

 

 

3

 

 

 

 

10

 

 

12

Realized (gain) on investment in frontdoor, inc.

 

 

 

 

 

 

(40)

 

 

(Gain) loss from discontinued operations, net of income taxes

 

 

 

 

(56)

 

 

1

 

 

(80)

Provision for income taxes

 

 

21

 

 

19

 

 

30

 

 

26

Loss on extinguishment of debt

 

 

 

 

 

 

6

 

 

Interest expense

 

 

18

 

 

37

 

 

45

 

 

75

Adjusted EBITDA

 

$

131

 

$

125

 

$

240

 

$

222

 

 

 

 

 

 

 

 

 

 

 

 

 

Terminix

 

$

106

 

$

110

 

$

189

 

$

196

ServiceMaster Brands

 

 

24

 

 

24

 

 

47

 

 

46

Corporate

 

 

1

 

 

2

 

 

4

 

 

1

Costs historically allocated to American Home Shield

 

 

 

 

(11)

 

 

 

 

(22)

Adjusted EBITDA

 

$

131

 

$

125

 

$

240

 

$

222

Terminix Segment

Revenue by service line is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

 

2019

 

2018

 

Growth

 

Acquired

 

Organic

Residential Pest Control

 

$

187

 

$

166

 

$

22

 

13

%

 

$

11

 

7

%

 

$

10

 

6

%

Commercial Pest Control

 

 

100

 

 

88

 

 

11

 

13

%

 

 

10

 

11

%

 

 

2

 

2

%

Termite and Home Services

 

 

171

 

 

163

 

 

8

 

5

%

 

 

2

 

2

%

 

 

6

 

4

%

Other

 

 

25

 

 

24

 

 

1

 

2

%

 

 

 

%

 

 

1

 

2

%

 

 

$

483

 

$

441

 

$

42

 

10

%

 

$

24

 

5

%

 

$

18

 

4

%

Fumigation

 

 

12

 

 

15

 

 

(3)

 

(20)

%

 

 

 

%

 

 

(3)

 

(20)

%

Total revenue

 

$

495

 

$

456

 

$

39

 

9

%

 

$

24

 

5

%

 

$

15

 

3

%

ServiceMaster Brands Segment

Revenue by service line is as follows:

 

 

Three Months Ended

 

% of

 

% of

 

 

June 30,

 

Revenue

 

Revenue

(In millions)

 

2019

 

2018

 

2019

 

2018

Royalty Fees

 

$

35

 

$

35

 

53

%

 

55

%

Commercial Cleaning National Accounts

 

 

19

 

 

16

 

29

 

 

26

 

Sales of Products

 

 

3

 

 

4

 

5

 

 

6

 

Other

 

 

8

 

 

8

 

13

 

 

13

 

Total revenue

 

$

65

 

$

64

 

100

%

 

100

%

 

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Contact:

Investor Relations:
Jesse Jenkins
901.597.8259
Jesse.Jenkins@servicemaster.com

Media:
James Robinson
901.597.7521
James.Robinson@servicemaster.com